There is diversity in investors that depends upon the type of stock they want to invest in as well as the purpose of the investment. Some prefer short term investments where they hope to make a return on the investment quickly, then trade off the stock. Others prefer a long-term investment with stocks that pay dividends which are reinvested in the stock, increasing the overall number of shares owned over time. One thing to bear in mind about stocks that pay dividends is that it shows that the board of the company believes in the long-term profitability of the company and this is something that every investor should take into consideration. When a company has shown that they have the infrastructure firmly set in place to maintain sustainability, the odds of the stock yielding a good return on investment over the long term are significantly higher. One of the most highly recommended stocks, that few seem to be talking about is York Water. This is one of those companies that you’ve probably never heard of, but here are 20 reasons why you might want to consider York Water stock.
1. It’s a major water provider
York Water is a drinking water provider and wastewater services company in Pennsylvania. The company is in operation in 48 counties in the state. It serves a large number of residents and has established itself in the state as a major provider. One reason why we believe that the stock in this company is a reliable investment is because this is a very large and established company with a demand for services that will only increase with the passage of time. In short, they’re not going away.
2. The market cap is $564 million
York water is traded on the Nasdaq stock exchange under the ticker symbol YORW. As of the most recent check, the market cap for York Water was $564 million. It’s performed at an impressive rate in paying dividends to shareholders over the past several years and has established a strong and healthy track record. Although the average daily trading volume of 31,629 over the last quarter doesn’t make it popular with retail or Wall Street investors, this in no way impugns its record.
3. It’s an old and established company
When you’re looking for a company to invest in one of the first things to do is to look into the history of the company, how long it’s been in existence, the growth of the company and so forth. York Water was founded in 1816. The business is more than two centuries old.
4. It’s been paying dividends for more than 200 years
Here is another impressive fact about York Water. The company began making regular dividend payments to its shareholders from the date that it was founded. There has not been a time when the company has had to miss a dividend payment. This speaks well of York Water’s track record with investors who hold stock in the business. This amounts to 203 consecutive years of dividend payments.
5. The services and goods it offers are basic needs
Another fact about York Water that investors should consider is that the business provides products and services that help in meeting the basic needs of the population that it serves. There are no residences or business that can do without a steady supply of drinking water, and in addition, they will always need a sewer service provided by York Water’s wastewater management system.
6. The type of services and products allows for reliable forecasts
York Water doesn’t have any trouble predicting their future cash flow. It offers a service with predictable income sources from those who pay their water and sewer bills, and this is an established number. Everyone who is hooked up in the system to receive these services is verified in the database and at least, the minimum basic charges are income that can be depended upon. They have a highly predictable cash flow which takes the guesswork out of future plans for expansion funding.
7. There isn’t much competition for York Water
York Water doesn’t need to make compensations to beat out the competition in the market for their services. When it comes to the provision of drinking water and for wastewater services, they’re a major player in the game. Within the counties that the business serves, there is no competition.
8. They’re government-regulated
Another confidence builder in York Water is that the company falls under strict regulations by the Pennsylvania Public Utility Commission. Although this prevents them from setting the prices for water usage too high without prior approval of the commission, it also prevents wholesale price fluctuations. This ties in with the predictability of the cash flow. It’s regular and when it comes to stock investments, you are at an advantage when the company that you invest in has a regular and predictable cash flow. Government regulation actually helps to protect this consistency.
9. The company maintains a reasonable debt level
The management team at York Water uses extreme caution when approaching an acquisition. There is cautious spending even in the acquisition of new companies to bring into the fold. This is a part of their debt management system that keeps the debt of the company at reasonable levels, and although they’ve added new customers through the process of acquisition, the debt load is kept at a manageable level.
10. Low dividend payments mean a higher yield and greater confidence
There are some who will look at the 1.6% dividend yield and think that it’s a bit low for a utility stock, but you must also consider that York Water stock had a 36% gain over the past twelve months. When you look back over the past five years, the gain has been 110%. There is no getting around the fact that York Water is an excellent dividend stock and investors should consider making this a part of their long-term investment portfolio.
11. York Water has increased its EPS
York Water has consistently improved its earnings per share. Over the past fiscal year, the company made an increase from $1.04 to $1.08 reflecting an improvement of 4.3%. Although it’s not a huge amount it is consistent and shows steady progress.
12. The EBIT/tax margins are flat
This is an indication of the company’s growth. From year to year, the EBIT margins and revenue have remained at about the same level. Although the long term growth is not exploding, one must also realize that the degree of risk is also lower. This is because the company is so very stable.
13. Insiders are buying and selling York Water shares
Another piece of encouraging information about York Water is that insiders are buying and selling the shares, but there are more buying than there is selling. One single investor spent $17k in shares for a price of $33.42 each. This tells us that there are others who think that investing in York Water shares is a good idea.
14. York Water is ahead of the curve
When it comes to growing the EPS, York Water has the edge over a variety of different companies. There are many that are still having difficulty growing their EPS. The slow and steady approach that York Water has taken has resulted in a consistent increase and although some may scoff at this attack on the situation because of the lack of speediness, it’s maintaining consistency fairly well across the board.
15. York Water has an amazing dividend reinvestment plan
The York Water Company has a dividend reinvestment and direct stock purchase and sale plan. It welcomes new investors so it’s not necessary to already be a shareholder in order to participate in the plan. York has made it easy to purchase common stock, and then reinvest the dividends to increase your ownership level in the company. This is just one of the really great aspects of York Water that makes it a good investment stock. There are no charges for the investment, unlike many brokerages who charge transaction fees and commission expenses.
16. You can also make cash investments whenever you want
The Dividend reinvestment plan offered by York Water not only is a free service where all of your investment dollars go directly to the purchase of stock, but they also have another advantage for investors. You can also set up optional cash investments which do result in brokerage fees and commissions but they are paid by York Water under the agreement. You still get to participate in investment activities without the need to pay ridiculous fees and commissions charged.
17. York Water is transparent
Another thing that we appreciated about York Water is its transparency. There are no hidden fees or charges that they do not discuss upfront in the dividend reinvestment plan advertisement and document. Selling shares of York Water stock will result in charges for fees and commissions and this is plainly stated in the prospectus. They are upfront about this and the document also discusses the risks associated with any type of investment in the stock market and publicly traded companies. There are no guarantees of receiving a return on your investment ever, but this is a stock that has done well enough in maintaining a stable and reliable system for dividend payouts to shareholders.
18. York Water stock has an absurd valuation
Analysts at Seeking Alpha have pointed out that the York Water Company is a small utility in Pennsylvania, under regulation and ran conservatively. What this means is that the ability to grow in profitability is limited. This is not a bad thing for investors though. The company has recently completed a filing for a rate increase which if approved will result in higher profitability. Having said this, the valuation of the current sock is considered to be overvalued. The near term fair value is between $18-$24 per share which is a downside of between 38% and 54% of the current levels. From an expert point of view, these equities are incorrectly priced at a ridiculous level.
19. Absurd valuation gives investors a tremendous opportunity
Having established the fact that York Water stock is absurdly valued, this is a potential goldmine for investors. York Water is microcap stocks and investors are being given the opportunity to profit from this inefficiency in pricing. There is a big potential for making a sizable return shorting the stock, according to some analysts. YORW’s market cap is $500 million with an enterprise value of $585 million. The 12-month revenues ending March 31, 2017, were $47.4 million and the stock was trading at a surprisingly high enterprise value to sales ratio that amounted to 12.3x. This is high for a regulated utility when compared to other profitable water utilities listed on the stock exchange.
20. York Water has an excellent summary for investors
To sum it up, there are more reasons to invest in York Water stock than not to. To summarize, YORW is an investor-owned water utility. The company is regulated by the Pennsylvania Public Utility Commission and its annual revenues are predictable and stable. The company has filed for approval for a rate increase. The company is more than 200 years old and currently serves over 190,000 customers in Southern Pennsylvania. It has consistently paid dividends to shareholders since its first day of operation in 1816, spanning a period of 203 years of consecutive payments and counting. While it is a bit perplexing how the company came to be so grossly overvalued it does represent an excellent opportunity for investors to make a good return on their investment in the company’s shares. York Water even offers a dividend reinvestment plan for established and new shareholders that is offered without fees for purchase, but they plainly state that there are fees charged when the stock is sold.